Trump warns Iran, then offers negotiations

US President Donald Trump has warned Iran that war would lead to "obliteration like you've never seen before" but insists he is willing to negotiate without preconditions.

"I'm not looking for war and if there is, it'll be obliteration like you've never seen before," Trump said in an interview, pre-recorded on Friday with Meet the Press and aired on Sunday.

"And if you want to talk about it, good. Otherwise, you can live in a shattered economy for a long time to come."

Asked if he would require preconditions, Trump said: "Not as far as I'm concerned. No preconditions."

Trump has previously said he is willing to talk with Tehran about its nuclear program without preconditions, but it is the first time he reiterated the stance since Iran downed an American drone on Thursday.

Meanwhile Iranian President Hassan Rouhani, in his first public comments since the drone was shot down, demanded that the US face international consequences for allegedly violating Iran's airspace.

"This latest incident was once again a violation of international rules," Rouhani said on Sunday in a meeting in Tehran with Gabriela Cuevas Barron, head of the Inter-Parliamentary Union, according to a statement from the presidential office.

"As they ignored our warnings, we had to shoot the drone down," he added.

But Iran also urged restraint. Laya Joneydi, Iran's vice president for legal affairs, said that all sides must attempt to avoid an escalation of the conflict as she announced legal action against the US.

Tehran said it would take legal action and present "incontrovertible evidence" to the United Nations.

The US insists the aircraft was over international waters in the cramped Strait of Hormuz, a key energy shipping route, when it was downed by Iran's Revolutionary Guard. The drone dispute has significantly escalated tensions in the region.

Trump said he called off a retaliatory strike following the incident because the attack would kill a disproportionate amount of Iranians.

US National Security Adviser John Bolton on Sunday warned Iran that it should not "mistake US prudence and discretion for weakness" after President Donald Trump called off strikes against Iranian targets.

"No one has granted them a hunting licence in the Middle East," Bolton said in a Jerusalem press conference with Israeli Prime Minister Benjamin Netanyahu.

Bolton is set to participate in a summit with national security advisers from Israel and Russia next week.

The US withdrew last year from an international deal designed to prevent Iran from obtaining nuclear weapons and has reimposed sanctions on Tehran in a "maximum pressure" campaign, demanding stricter oversight of their nuclear program and changes to Iranian foreign policy, such as its support for groups in Syria and Yemen.

On Saturday Trump said more sanctions will be imposed on Iran on Monday.

Rouhani called the sanctions the "equivalent of economic terrorism" and said the US pull-out from the nuclear deal stood at "the root" of the current regional and international conflict.

Gholam Ali Rashid, commander of the Khatam-al Anbiya headquarters of the Revolutionary Guard, said Iran had no interest in a regional war and should avoid being drawn into a "strategic conflict" with the US, Israel and Saudi Arabia.

"If a war in the region should break out, it would spiral out of control and no country would be able to get a grip on its extent or duration any more," he said in remarks posted online by the Guard on Sunday.